Free economic zone on an open border

The Meghri free economic zone, which opened up in December 2017 does not operate in its full capacity yet, but the residents of the community believe it is the guarantee for the future development of their community.

Iranians planning to start a business in the free economic zone are frequent guests at Meghri community head Mkhitar Zakaryan's office. Iranians are mostly interested in manufacturing leather goods and have plans to open a slaughterhouse in the region. However, Zakaryan believes the development and proper operation of the free zone will require some while.

The multimillion Iranian markets are next door. The free economic zone is a safe place for Iranian investments. They will be waived from profit tax and value added tax, and will gain those 20 percents. The zone will bring in new jobs. The multi-vector trade regimes in Armenia have the potential to become bridging solutions for Iran, EAEU, as well EU," says Zakaryan.

The free economic zone will encompass agriculture, processing, trade, cargo, and warehousing enterprises, as well tour agencies, and other businesses. The minimum required infrastructures and conditions are already operational in the area.

Ads written in Persian for Iranian tourists are frequent at public spaces in Meghri.

The second stage of the free economic zone development implies enlargement of infrastructure and activities, as well as expansion of the territory for 70 more hectares. Around 50 ha will be leased, and some 10 ha will be used for logistical infrastructure and warehousing facilities; the remaining areas are intended for offices and other services.

Levon Mirzoyan, resident of Agarak born in Meghri, is a teacher of history and Persian language. Our conversation is interrupted by a call on his phone, and Mirzoyan responds to an Iranian friend in fluent Persian.

Levon, 30, says the economic influence of the neighboring Iran on the region is tangible, and it will get even more visible, he presumes.

Meghri grew into enlarged community in 2016, embracing the towns of Meghri and Agarak, as well as Alvanq, Aygedzor, Gudemnis, Tkhkut, Lehvaz, Litchq, Kartchevan, Kuris, Nrnadzor, Shvanidzor, Vahravan, Vardanidzor, and Tashtun villages.

The challenges facing the community involve poor condition of roads connecting its settlements and lack of public transportation system, whereas the distance between them is 10 to 38 km on average.

The lack of public transport creates grave social-economic problems for the community. Many of the residents in Meghri and Agarak possess land lots, which either belong to them or are taken on lease in the villages of the community. Yet the absence of commute hinders the use of those lands.

Nrnadzor is a village 30 km from Meghri.

Thirteen kilometers of the road to the village remain unsurfaced, which creates additional discomfort to people travelling to Nrnadzor and back.

Nrnadzor used to be densely populated by Azerbaijanis and was known as Nyuvadi. Following the Karabakh conflict it was repopulated by families from Gyumri, Kapan, Goris, and Armavir. Later families from Getashen moved to the village, too.

Anna Babayan, 20, who was born and raised in Nrnadzor, is now English and Russian teacher at the village school. She says she sees no perspectives for her in the village.

Siran Chichyan, one of the residents of Nrnadzor, harvests two tones of pomegranate within just one agricultural year; but selling the fruit is problematic because of the bad roads.

"The road is unsurfaced, which makes getting the crops to the market a problem," says Siran, and adds: "Although there is no market in Meghri." "The resellers buy pomegranates for AMD 250 and resell for AMD 1000. Oftentimes the bad roads don't let them get here, and they prefer to buy from Shvanidzor, which is much closer, and our crops remain unsold," says Siran Chichyan, 63.

The school in Nrnadzor is in urgent need of specialists, who are currently replaced by teachers of other subjects.

"We need teachers of history, geography, chemistry, biology, Russian and English. We post the vacancy announcements every year. We used to have specialists from Meghri, who would travel this far, but they don't anymore, because of the commute problems," says psychologist Anna Babayan, 20.

Children in Nrnadzor are deprived of opportunity to get education in music, arts, or sports, only because of the lack of transport.

"We have talented children growing deprived of it all. The public transport connecting us to Meghri works only twice a week – on Tuesdays and Fridays – leaving at 9:00 am and getting back at 5:00 pm. And that after the community was enlarged; before, the only means to get there and back was the taxi, which would cost AMD10 000," Anna shares.

The head of community Mkhitar Zakaryan says they will spare no effort to erase the difference between the residents of Meghri and the villages.

The head of community Zakaryan says they will do their best to eliminate the discrimination between the urban and the rural residents.

"We need to reach a point when the residents of the farthest villages such as Kartchevan, Nrnadzor, Litchq do not feel difference from those in Meghri. The center for art and culture in Meghri shall equally belong to people from Kartchevan and Nrnadzor," he says.

Area Development Foundation, supported by the governments of the United States and Switzerland, implements AMD 380 million community capacity building program, which intends to solve a number of local problems.

The program will embrace parts for construction and purchase of equipment. The program also includes surfacing of 1 km section of the road to Meghri (AMD 100 million) as well as installation of 11 roadside stops, which will require AMD 130 million.

Zakaryan says the remaining part of the funds will be spent on purchasing equipment – three minibuses (to connect the villages to Meghri); three dust trucks, two tractors, and 140 waste bins.

"Minibuses will become community property in longer-term perspective. At the moment, though, we have rented five to connect the villages to Meghri. The minibuses will have 20 seats and will travel from the villages to the community center twice a day," he says.

The head of community believes the administrative enlargement is an opportunity to best use the potential of the region. The settlements included in the community have their advantages and soft points, and the problems need to be solved by concentrating the available resources.

The Women Resource Center operating in Meghri from 2008 helps develop civil society in the reigon. Satik Harutyunyan, the founder of the center, says the major issues of the region are in the constant focus of their attention and they do their best to reach out to where the problems are most acute.

She recalls the protests against the mining project in Tashtun village in 2013, and says the center carried the main burden of its organization by instigating a petition against the exploitation of the mine, which was signed by 90 percents of the population.

"The community council joined the people, appealed to the government in an open letter; but soon after, the council went under pressure, and, the population stood back from its demands. With a group of seven women we went to Tashtun and stood against the mining works all alone. Of course, they did what they wanted to, but the works are suspended today. It is still unclear was the mining a real project, or it was just a case in money laundering," says Satik Harutyunyan.

The organization is consistent in watching the electoral processes (both local and national) unfolding in the community, and is performing a role of a watchdog.

"We became a threat the very moment we started observing elections. We have been under pressure, too; we have gone through all that. Our members have done their best to prevent lawless actions everywhere they have been. We have covered all those events on meghrinews.com, which we created in 2012," she says.

The Women Resource Center constantly watches the performance of the Meghri town administration, follows on town council sessions, and comes up with initiatives. The head of the center says the announcements on the sessions, and the ad-hoc sessions, in particular, are not posted on the website seven days prior to the scheduled day, as the law ascribes.

"Or, the public hearings are organized when people are at work, and, obviously, few are able to be present during the day time, especially those willing to express alternative views. Public discussions are organized using administrative resources, such as kindergarten and school staff. Those are the same people who are involved in elections," says the head of the resource center.

Following the enlargement the revenues of the community grew for about 46%. As compared to 2017 the revenues of Meghri community grew for AMD 203.2 million, reaching AMD 638.7 million.

Mkhitar Zakaryan, head of Meghri community, says growth in revenues is a result of improved administration. As a first move the community has taken steps to fight shadow economy. In the period between November and December 2017 alone 58 new businesses (legal entities) have been identified in Meghri and have been brought to light.

"There were 133 tax-paying businesses in Agarak, but own revenues of the community grew mostly owing to Meghri and other communities," says Zakaryan.

According to analysis by Urbanista the funding section of the Meghri community budget has doubled in 2017 against the amounts in the previous year.

Mariam Tsatryan, speaker to the head of Meghri community, says the better picture is a result of improved processes in the management, funds available at the start of the year, as well as investments made by the donors for the community development program.

The expenditures of the community funded by the local budget increased by 48.4% in 2017, which is AMD 660 million more as compared to the preceding year. One third of the budget for 2017 was spent on public services in general (32.15%); an almost equal amount was spent on education (31.10%).

The head of community underlines the increases expenses on education are due to opening new kindergartens in rural communities. The expenses per each child make AMD 20 000 per month. Parents pay AMD 5000 per month .

"There are villages were more than one generation has been raised without a kindergarten. We have opened pre-school institutions in two villages – Lehvaz and Karchevan; another one is currently under construction in Vardanidzor," says Zakaryan.

According to an online inquiry by Urbanista community residents believe the major portion of the local budget shall be directed to environmental protection, improvement of yards, and road construction.

In 2017 about 23% of the community budget was spent on environmental programs. Compared to the preceding year the environmental expenditures have grown for 63% (AMD 151 million).

Major investments have been made in the utility services. Tsatryan says garbage removal was performed with major shortcomings in 2016: the situation has changed after the enlargement of the community.

As to the fee for garbage disposal services, Mkhitar Zakaryan, the head of the community says: only 2900 of 4600 people living in Meghri pay for the service.

"The fee is AMD 250 per person, but the service they get is worth only AMD 100-150. Fairness shall be provided," he says.

The analysis by Urbanista reveals expenditures on social security grew in 2017 for some 187% (AMD 12.2 million) as compared to those a year before.

Mariam Tsatryan observes the savings which were made possible owing to the growth of own means, optimization and more targeted spending following the enlargement of the community have allowed more funds to be steered for social security.

The head of the community boasts the construction of lighting system in the region embracing all the rural communities.

The budget spending on lighting in 2017 made AMD 25,429.5 thousand. Another AMD 33 million was provided by KfW, the German Development Bank, through Support Programme to the Protected Areas-Armenia program.

"With the financial support of KfW bank some 250 lampposts and LED-lamps have been installed on the territory of the community. The works were funded from the community budget," says Mariam Tsatryan.

People in Meghri, which has a population in 11 604, are mostly employed at Agarak copper and molybdenum plant, as well as in the Russian and Armenian military bases; part of the population is engaged in farming.

Private investors seem more interested in mining in the territory of the community, which eventually results in polarization of economy, while Meghri community bears environmental consequences of the mining industry. In 2017 AMD 1 254 300 allotted from the state budget to the community came from environmental taxes.

About one third of the budget spending in 2017 was used in the education (31.10%).

Mkhitar Zakaryan says the funds are mostly directed to provide additional food at kindergartens. Here, unlike other regions of Armenia, the requirements for food at pre-school institutions are stricter.

Nevertheless, the local population faces serious environmental challenges today due to the evolving mining in the region, including expansion of tailings, waste accumulation, as well as contamination of water.

In recent period the locals have been actively fighting against the opening of new mining sites, taking to the streets, signing petitions, and even going into hunger strikes.